Queensland Economic Advocacy Solutions

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Does Queensland strike more today than in the past?

Does Queensland strike more today than in the past? Regardless of perception the answer is a categorical 'no'.  Latest data from the ABS confirms that the number days lost due to industrial action in Queensland in 2017 was 32,200.  If that number sounds high, keep in mind there are 2.47 million Queenslanders in work.  In addition this total is effectively half of the 25 year average (62,000) and our workforce over that period has grown significantly yet total days lost has declined.

In terms of Queensland’s percentage of total days lost in Australia, there was a concerning trend in both 2015 and 2016 where Queensland was accounting for a disproportionate amount of days lost.  However this trend has now settled, back to approximately 22 per cent, which is close to the State’s percentage of the total Australian workforce.

Industrial action is taken by employees to settle a workplace dispute about working conditions and includes when employees don't come to work; fail or refuse to perform any work at all; delay or put a ban or limit on the work they do; and / or are locked out of a workplace by their employer.

Examples of industrial action in 2017 in Queensland ranged from BCC bus drivers, childcare workers, Centrelink staff through to the prominent Glencore strike action.

At present we have relatively low incidence but high economic cost of industrial action yet change is potentially on its way that could see both escalate substantially. The very prominent ACTU secretary, Sally McManus, believes and has stated publicly that onerous industrial relations laws needed to change because it is too hard to take industrial action.

"If employers don't give pay rises if you ask nicely, the only thing workers have left is to exercise their ability to withdraw their labour.  If you take that away then they don't have bargaining power." Sally McManus ACTU secretary

The area of the Fair Work Act relating to this issue is complex but in short there are a series of actions that must be taken for industrial action to be 'protected' (ie allowed for under the Act).

If the industrial action is unprotected the Fair Work Commission can suspend or end the action on the basis that it can cause significant economic harm to the employers or cause significant damage to the Australian economy or important parts of it.

A key point for the employee is that if the industrial action is ‘protected’ then an employer must not threaten to dismiss or discriminate against the employee taking the action.

For more information on industrial action:

The reality is the level of industrial action in Queensland and Australia has fallen not because it is too difficult to take action but mainly as a result of secret ballots for industrial action being introduced ie individuals can no longer be coerced or feel pressured from ‘mates’ into voting to take strike action.

If anything this issue to my mind is not really about the extent of industrial action but about why it is being taken.  Officially the top five reasons for industrial action in Australia over the past 10 years have been as follows:

  1. Enterprise Bargaining related; Employment conditions
  2. Enterprise Bargaining related; Remuneration
  3. Non-Enterprise Bargaining related; Employment conditions
  4. Non-Enterprise Bargaining related; Health and safety
  5. Non-Enterprise Bargaining related; Union issues

The case for change in this area is very weak by the ACTU and if anything laws could be tightened to take account of ‘industrial bastardry”. 

What do I mean by this, well reasons for industrial action often appear admirable but the reality can be otherwise.  For example action taken on the grounds of ‘health and safety’ are often inappropriately used as leverage to achieve other industrial purposes.  Those purposes often relate to a union enterprise agreement or subcontractor needing a union enterprise agreement that specifies more generous employment conditions and remuneration.

My view is that the area within the Fair Work Act relating to industrial action is actually working reasonably well and should not be tampered with.  The case for tightening the laws is equally as strong as the case for loosening them.

The problem however is that this issue is rapidly becoming one about ‘votes’ and not the relationship between employees and their employer.   The business community should be very wary of politicians seeking to derive political mileage out of workplace relations as recent history holds that businesses come out second best. 

Data sourced from ABS Catalogue: 6321.0.55.001 - Industrial Disputes, Australia, Dec 2017 

Unrealistic ambit claims characterise 2017-18 Annual Wage Review

Each year the Fair Work Commission (FWC) is responsible for reviewing and setting minimum wages for employees as part of an annual wage review.  The Commission issues a decision for the national minimum wage (NMW) and for pay rates for all 122 modern awards, which comes into operation on 1 July for the following financial year.

The 2017-18 Annual Wage Review is now underway for wage rates in the 2018-19 financial year.  As part of the Review the FWC considers:

  • the performance and competitiveness of the national economy, including productivity, business competitiveness and viability, inflation and employment growth; and
  • promoting social inclusion through increased workforce participation; and
  • relative living standards and the needs of the low paid; and
  • the principle of equal remuneration for work of equal or comparable value; and
  • providing a comprehensive range of fair minimum wages to junior employees, employees to whom training arrangements apply and employees with a disability.

As part of this process the Commission invites relevant parties (Unions, employer groups, State and Federal Governments and Oppositions) to put forward their own recommended increase.   Submissions closed yesterday and disappointingly this process is often rife with ambit claims (referred to as a Blue Sky Demand) and unfortunately the 2017-18 Annual Wage Review is no different.

The queen amongst these is obviously the $50 increase proposed by the ACTU (more than double last year’s increase) but also some employer groups recommending no increase at all.

Most of the employer submissions are proposing in their own words ‘modest’ increases between 1.8 and 1.9 per cent.  This contrasts with Reserve Bank of Australia and Federal Budget forecasts of 2.25 per cent for inflation and 2.75 per cent in the wage price index for 2018-19.

For several years during the 1990's I was involved in negotiating consensus positions between a State peak industry body and the State trade labour council that was effectively rubber stamped by the State Industrial Commission.  I often think back to those days and perhaps foolishly wish that we could return to them as I believe it is in all employee and employer interests for unions and employer groups to work together to try and nut out a consensus position.  This potentially achieves balance between the competing outcomes of profitability, more employment hours and higher wages leading to an overall lift in the standard of living. 

Instead we have the same old ambit claims from both sides when we know on the balance of the past the FWC will land with a recommendation somewhere in the range of $15.80 and $26.00. Yet employer groups come with a low-ball offer and Unions with a high ball one. Analysis of the past 8 years reveals the average increase was $18.90 and percentage increase of 3.1 per cent.

Based on the current performance of the National Economy it is reasonable to expect that the FWC will land at a ruling in the upper range and I would anticipate it will be between 3 and 4 per cent or $21 and $28 dollars.

Any recommendation by unions or employer groups outside that band is realistically not even in the ballpark and it is perhaps time for them to rethink their adversarial approach to this process.

Queensland's domestic economic growth by the numbers

Latest data from the Australian Bureau of Statistics reveals Queensland's domestic economy is tracking relatively well although growth continues to lag other States. QEAS takes look at this important indicator.

​When gauging the overall performance of the Queensland economy there are two indicators that can be used.  One is the annual ABS Catalogue 5220.0 that measures 'Gross State Product' (GSP) and the other is ABS's quarterly catalogue 5206.0 that measures State Final Demand (SFD).  In short SFD measures household consumption expenditure, government consumption expenditure, public sector capital expenditure and private sector capital expenditure.  GSP measures these four components plus net international trade (i.e. exports minus imports).  

In recent times SFD has provided a much better indication of the overall health of the Queensland domestic economy.  It is a measure that more aligns with what businesses, employees and broader community sees and feels each day.  GSP's inclusion of exports whilst vitally important captures growth that is not felt as much domestically in supply chains and jobs (LNG export is a very good example of this point). 

So in turning to the data Queensland's quarterly SFD growth increased by a healthy 0.7 per cent in trend terms and 0.9 per cent seasonally adjusted in the December quarter 2017 and compares to national growth of 0.8 per cent and 0.6 per cent respectively.  Over the past year (December Qtr 2016 - December Qtr 2018) Queensland's domestic economy has grown by 2.9 per cent in trend terms and 2.6 per cent seasonally adjusted.  This growth was slightly less than national growth of 3.3 per cent and 3.1 per cent respectively.

Queensland growth over the past year has mainly been driven by household and government consumption spending and private sector capital expenditure. In trend terms general government consumption expenditure increased by 4.9 per cent, household consumption expenditure increased by 1.8 per cent and private sector capital expenditure increased by a very healthy 5.3 per cent (albeit off a very low base).  The negative weight was public sector capital expenditure that continues to be significantly less than long-term trend levels.

In summary, the data reveals Queensland's domestic economy has moved on from the contraction experienced between 2014 - 2016 and is now growing steadily.  This is unquestionably good news for jobs, as job creation as a rule of thumb lags economic growth by six months and we should inevitably see the State's unemployment rate fall below its stubborn and cemented 6 per cent.  The data will also hopefully mean wages growth in the not too distant future.  The way to look at the overall relationship between economic activity, jobs and wages is domestic economic activity precedes job creation which precedes a tightening in the labour market leading to wages growth.


The Health of the Queensland Business Community (The Good and the Bad)

The Australian Bureau of Statistics this week released their annual 'Counts of Australian Businesses', which does precisely that, it counts the number businesses actively trading as at June 30, 2012, 2013, 2014, 2015, 2016 and 2017.  It also provides rates of business entries and exits as well as counts of the survival of businesses.  It represents a very good snapshot in gauging the ‘overall’ health of the Queensland business community and is very comprehensive as it is sourced directly from the Australian Business Register (ABR) comprised of businesses obtaining an Australian Business Number (ABN).

The news for Queensland is excellent with an additional 12,031 businesses operating in 2016-17 compared to a year earlier.  Business numbers in the Sunshine State have consistently been on the rise since 2013-14.  A growth rate of 2.8 per cent in 2016-17 is the highest of the past five years and places Queensland in third position behind only NSW and Victoria.

Of the 437,628 businesses operating in 2016-17, 97.5 per cent or 425,597 are defined as being small business employing less than 20 employees.  Growth in overall numbers has consistently come from this demographic but the percentage proportion of small businesses has remained relatively steady over the past five years.  Medium sized businesses make up 2.4 per cent and large businesses just 0.1 per cent. 

Drilling down into the data there are some very good signs for Queensland.  The number of new entries has consistently been rising over the past five years up from 49,569 in 2012-13 to 64,097 in 2016-17.  The entry rate as a percentage of total businesses has over that period risen from 11.5 per cent to an encouraging 15.1 per cent.

Conversely the number of businesses closing or exiting has fallen from 63,747 in 2012-13 to 52,480 in 2016-17.  The exit rate over this period has fallen from 14.8 per cent to a much better 12.3 per cent. 

Pleasingly both the Queensland entry and exit rates are now starting to come back into the pack compared with other States.  Once upon a time we were the worst performing State and this is no longer the case with Western Australia in that dubious position.

For some excellent analysis on where the growth is coming from in terms of industry sector and geographical location please refer to Gene Tunny’s Queensland Economy Watch post here.

The caveat to this article is of course that in discussing 'overall' numbers, just how tough it is for individual businesses is masked.  Indeed our business survival rate continues to be the lowest in the Country.  Of those Queensland businesses operating in 2013-14,  only 62.5 per cent continue to be in existence in 2016-17, the lowest of all States.  Furthermore of those ‘new’ businesses that set up in 2013-14 only 54.3 per cent continued to operate in 2016-17, again the lowest survival rate of all States.

In summary the recent trend is a very good one for Queensland but decision makers must continue to do everything they can to maximise the likelihood that those persons who make the bold decision to 'hang up their own shingle' are successful in doing so.  


A business entry is defined as a business which is actively trading at 30 June in the reference year but was not actively trading at 30 June the previous year. 
This may occur when 

  • a business registers for an ABN with a GST role
  • a GST role is assigned to an existing ABN that did not previously have this role 
  • a business recommences remitting BAS data after a period where they had become a Long Term Non Remitter
  • a business recommenced its GST role after it had been cancelled
  • a business unit moves between the profiled and the non-profiled populations. 

A business exit is defined as a business which was actively trading at 30 June in the previous year, but was not actively trading as at 30 June in the reference year. It is important to note that a business exit does not necessarily equate to a business failure. A business exit may occur when

  • a business cancels its ABN or GST role
  • when the business ceases to remit GST for at least five consecutive quarters (or 3 consecutive years for annual remitters)
  • a business moves out of or in to the profiled population
  • a business is sold and the ABN changes
  • a business is taken over or involved in a merger

A surviving business is defined as a business that is active at 30 June of the current year and was also active at 30 June of the previous year. 
In this release, two types of survivors are recorded. 

Queensland wages remain stubbornly low despite labour market improvement

Latest data from the ABS confirms that wages growth remains stubbornly at the lower end.  The wage price index in Queensland (total hourly rates of pay excluding bonuses) over the past twelve months increased by 2.2% compared to a national increase of 2.1%.  The Queensland increase compares to the average growth rate over the past 12 years of 3.3%. 

Growth that has occurred is mainly being driven by the public sector with Queensland public sector wages growth over the past year at a healthy 2.8% compared to a private sector increase of 1.9%.  The fact that public sector wages is outgrowing private sector wages is an interesting side discussion.  In short it is good because the State's 261,224 public servants are earning more and hopefully spending that extra money in the economy and it is bad from the point of view that the private sector restraint is not being evidenced by the State Government and a question hangs over its sustainability.

In moving on I had expected private sector wages growth to start to gain momentum in the December quarter given the relative improvement in our State's labour market.  The following indicators offer some explanation as to why the pendulum should and will eventually swing towards wages growth starting to increase again.

  • 110,000 jobs created in Queensland over the past year with a 75,000 of these being full-time and 35,000 being part-time.
  • Employment growth (4.7%) in Queensland is the highest amongst states and since prior to the GFC.
  • Total monthly hours worked in the past year has surged by 17.3 million hours.
  • The unemployment rate whilst stubbornly half a per cent above the national average (5.5%) has fallen in the past year from 6.2% to 6.0%.
  • The participation rate over the last year has increased from 64.3% to 66.1% as people reenter the labour market looking for their next job.

All of these are indirect evidence of demand starting to increase.  The nexus between employment growth and wage growth should in theory be strong.  In short as the labour market grows skill and labour shortages start to emerge and in turn employees can start to ask for higher wages and employers need to pay more to keep good staff from looking elsewhere.  However given that there are currently 230,000 Queenslanders saying they still want significantly more hours of work, employers are no doubt increasing 'hours' instead of 'wages'. Additionally, increased wages growth will take some time to be fully realised as enterprise agreements typically last three years before they need to be renegotiated so there will be a pipeline that has to be cleared.  

The final point to make is that over the past 12 years Queensland wages growth has been on average 3.26% each year and inflation 2.64%. The average difference between wages growth and inflation over that period has been 0.6% and at present that difference is just 0.3%.There is one final thing to also remember ....... it is economic activity that is generating employment growth and inevitably wages growth, but that same economic activity will also start to see inflation rise.  

In summary, I am confident that the low point of wages growth is now behind us but in real terms employees are still some way away from being significantly ahead unless you happen to be in the public sector.

Other graphs that help tell the story.


Why the State Government is ‘NUTS’ to offer Scottish beer giant BrewDog industry assistance

There are times to offer industry assistance and then there are times not to, such as the State Government’s announcement of ‘luring’ BrewDog to Brisbane.

There was much fanfare over the announcement BrewDog will open a $30 million brewery in Brisbane including a 50 hectolitre brewhouse, canning facility, tap room and restaurant on an 11,000-square-metre greenfield site in Murrarie. 

BrewDog is expected to employ more than 150 people in the next five years and 235 jobs created over the next 10 years which is great news for the Sunshine State. However, it also represents a very poor decision on the part of the State Government in offering a series of financial incentives through the $65 million Advance Queensland Industry Attraction Fund.

“The incentives our government is providing through our industry attraction fund were instrumental in BrewDog choosing to base its Australian operations here in South-East Queensland, providing another feather in the cap of our state’s growing manufacturing industry.  Minister for State Development, Manufacturing, Infrastructure and Planning, The Honourable Cameron Dick

I have been a long-term opponent to financial incentives and tax holidays targeted towards particular enterprises.  By definition it means that remaining taxpayers pay more than they need to (ie it is inequitable) and it distorts competition as well. The financial incentives offered to BrewDog will never be known as it is obfuscated under the mantra of ‘commercial in confidence’.

What I am interested to know though is ...... has anyone within Government bothered to ask how the 20 plus breweries already established in Brisbane and on the Gold Coast feel about a new competitor launching underpined by State Government funding?  Yes that’s right, taxpayer dollars are being used to set up an overseas company in Brisbane to compete against an already mature Queensland run and owned industry in SEQ. 

Gold Coast and Brisbane Breweries

  • Aardvark and Arrow, Varsity Lakes
  • Aether Brewing, Milton
  • All Inn Brewing Co, Banyo
  • Bacchus Brewing Co, Capalaba
  • Balter Brewing Company, Currumbin
  • Black Hops Brewery Burleigh Heads
  • Brews Brothers, Woolloongabba
  • Brisbane Brewing Co, West End
  • Burleigh Brewing CompanyBurleigh Heads
  • Catchment Brewing Co, West End
  • Fortitude Brewing Co. North Tamborine
  • Fortitude Brewing Company
  • Four Hearts Brewing, Ipswich
  • Gold Coast Brewery Nerang
  • Green Beacon Brewing, Newstead
  • James Squire, South Bank
  • Laughing Lizard Brewing Company, Arundel
  • Lost Palms Brewing Co, Miami
  • Morgan's Brewing Company, Yatala
  • Newstead Brewing Co, Newstead
  • Oxenford Brewing, Oxenford
  • Scenic Rim Brewery, Mount Alford
  • XXXX, Milton

Amongst over things BrewDog may have been offered a payroll tax holiday as many State Governments in Queensland and interstate have and do for certain companies but doing it for this company is plain wrong for a number of reasons.

The Queensland Competition Authority conducted a really good Inquiry into this subject and concluded the rationale to provide industry assistance is strongest only when there is a significant policy problem that should be corrected through government action. However in respect to the BrewDog example there is no policy problem to warrant intervention nor need to achieve a critical mass to spark an industry to take off. This industry has already launched and spectacularly so.

This decision has the initial short-term gloss of being an ‘announceable’ and creating jobs but in the medium to long term our economy will lose out. At the very least the costs and benefits of providing this assistance should be transparent and in the public domain. The amount of assistance, as well as the evidence base that underpins the government's decision to provide it, should also be publicly available.  

And if you don’t believe me then read what the Queensland Competition Authority has to say ……

“Government intervention to alter consumption or production (through industry assistance) will generally lead to a net loss for society.

The evidence that is available suggests that, although a number of industry assistance measures are beneficial, many others are ineffective and result in a range of costs, including resource allocation distortions, lower productivity, lower household incomes and harmful environmental impacts.

A significant portion of industry assistance in Queensland is directed towards supporting certain businesses or sectors over others, rather than towards correcting market failures. In a number of cases, the primary objective is to directly increase the profitability of private sector businesses. This assistance is unlikely to lead to a higher level of economic activity than would otherwise occur. Much is captured by private firms with limited or no positive effect on the welfare of Queenslanders as a whole.

The findings from this inquiry suggest that selective industry assistance is generally not a successful policy to generate economic growth — it is only suitable to address a specific set of policy problems and, as such, should be reserved for those circumstances. There is general agreement, even within assisted sectors of the economy, that businesses not government assistance, drive productivity and economic growth. “

So there you have it. I am not a fan of this decision and I suspect it may become the ‘holy grail’ of the wrong type of State Government industry assistance in Queensland.

Closing the Gap Report highlights employment challenge for Aboriginal and Torres Strait Islanders

Yesterday the Prime Minister released the Closing the Gap Report 2018 highlighting the significant challenge ahead in providing employment opportunities to Aboriginal and Torres Strait Islanders that in turn provides them with a livelihood and advancement in living standards.

In 2016, the unemployment rate for Indigenous people of working age was 18.4 per cent, 2.7 times the non-Indigenous unemployment rate (6.8 per cent). The unemployment rate is unfortunately an increase from 15.6 per cent in 2006 and 17.2 per cent in 2011.

In short the Report confirms that we are not on track in meeting the official Closing the Gap employment target of:

Halve the gap in employment outcomes between Indigenous and non-Indigenous Australians within a decade (by 2018)

Progress against this target is measured using data on the proportion of Aboriginal and Torres Strait Islanders of workforce age (15-64 years) who are employed (the employment-to-population ratio).

Disappointingly the Indigenous employment rate fell over the past decade, from 48.0 per cent in 2006 to 46.6 per cent in 2016. Over the same period, the non-Indigenous employment rate was broadly stable, around 72 per cent. As a result, the gap has actually widened by 1.5 percentage points to 25.2 percentage points over the past decade.

The employment target is complicated by the cessation of the Community Development Employment Projects (CDEP).   CDEP was a Commonwealth employment program in which participants were paid CDEP wages (derived from income support) to participate in activity or training. CDEP participants were previously classified as being employed, overstating employment outcomes.

The report states that by focusing on changes in the non-CDEP employment rate over time we can get a more accurate sense of labour market developments. If CDEP participants are excluded from those employed in 2006, the Indigenous employment rate falls by 5.6 percentage points to 42.4 per cent. Given that the 2016 employment rate was 46.6 per cent, this represents a 4.2 percentage point improvement over the past decade.

Regardless of methodology though the gap remains the size of the Simpson Desert for Aboriginal and Torres Strait Islanders which is truly sobering as they represent a fantastic and very capable workforce.

Benefits that the Australian Chamber of Commerce and Industry’s Employ Outside the Box Report lists are considerable and include:

  • Employing Aboriginal and Torres Strait Islander may open up a growing market for products and services.
  • Pre-employment training provided for Indigenous workers can be beneficial to non-Indigenous workers as well.

  • In regional areas, the connection with local communities can be strengthened and Indigenous Australians can be more committed to working locally.

  • Respond to the changing ethnic profile of your customers and the need to reflect this in the workforce.

  • Market your business as an employer of choice by promoting diversity in the workforce and enabling an inclusive and socially responsible work environment.

  • Demonstrating strong corporate citizenship may assist in gaining a market edge with key clients and enhance the public reputation of your organisations.

  • Organisations will gain new skills and knowledge from training and working with Indigenous employees.

  • Youthful workforce with the potential to be long term employees.

  • Build cultural diversity in your workforce.

  • Access to government funding and assistance with regards to training, recruiting and retaining Indigenous employees.

In summary, the Queensland economy is slowly transitioning from excess labour capacity to a period whereby skill and labour shortages will start to emerge again.  It would be great to see this transition smoothed by the uptake of employing Aboriginal and Torres Strait Islanders.  True Closing the Gap at its foundation has to rely on employment for Aboriginal and Torres Strait Islanders that provides them a livelihood and ability to bridge this divide.

The top ten largest increases in cost of living

This week has seen some much needed emphasis placed by media organisations on the financial difficulty being experienced by many Queensland households.  The Consumer Price Index (CPI) released last Thursday confirmed a 27% increase in the cost of living over the past decade for Brisbane households and compares to the national average of 25.8%. This overall increase however masks component increases that are greatly exacerbated for lower socio economic households.

The Consumer Price Index (CPI) measures quarterly changes in the price of a 'basket' of goods and services, which account for a high proportion of expenditure by Australian households.  For a more detailed definition of the CPI please refer below. In all there are 87 expenditure items in the CPI and QEAS has analysed the top 10 that have increased and decreased the most over the past ten years for Brisbane.

Unfortunately the ABS limits this collection to capital city households but many of the below outcomes will unquestionably be even more exacerbated for regional Queensland than for Brisbane. Expenditure areas that have increased the most in Brisbane in last 10 years are:

Aside from tobacco these 10 areas represent unavoidable cost of living expenses for most Queenslanders and it is pretty easy to see why some households are rapidly falling below the poverty line at present.  Electricity, water and sewerage, insurance, education, childcare and health services are all examples of necessitated expenditure.

At the same time some expenditure areas are actually decreasing in price however before we get too excited many of these would be defined as being in the area of discretionary expenditure.  Expenditure areas that have decreased the most in Brisbane in last 10 years are:

Perhaps the one expenditure class that made my blood boil the most was seeing the cost of milk decline by 16.2% over the past decade. This is disgracefully a reflection of the dominance of the major supermarkets and is really a reflection of the duopoly squeezing their supply chain. In this instance it is predominantly Queenslander dairy farmers who are being hammered so we can enjoy cheaper milk.

In closing something to bear in mind is that over this period of time Queensland’s average week earnings have risen by 35 per cent.   Overall, we should theoretically be better off as the CPI has risen by just 27%. However, the reality is for those Queenslanders whose essential cost of living expenses make up a larger portion of their household budget, they would in actuality, be quite worse off as 35 per cent is quite insignificant compared to some of the cost of living increases cited above.

The Consumer Price Index

The CPI is a social and economic indicator that is constructed to measure changes over time in the general level of prices of consumer goods and services that households acquire, use or pay for consumption. The index aims to measure the change in consumer prices over time. This may be done by measuring the cost of purchasing a fixed basket of consumer goods and services of constant quality and similar characteristics, with the products in the basket being selected to be representative of households’ expenditure during a year or other specified period.

This 'basket' covers a wide range of goods and services, arranged in eleven groups: 

  • Food and non-alcoholic beverages 
  • Alcohol and tobacco 
  • Clothing and footwear 
  • Housing 
  • Furnishings, household equipment and services 
  • Health 
  • Transport 
  • Communication 
  • Recreation and culture 
  • Education 
  • Insurance and financial services

Queensland Productivity on the rise: implications for the Sunshine State

The latest Australian Bureau of Statistics' measure of productivity growth reveals the sixth straight year in a row of productivity improvement in Australia (growing 0.6%) and the news is also good for Queensland.  Our State's productivity growth in the last two years has bounced back following a difficult period post GFC and it is now second only to NSW.

Productivity measures the efficiency with which combined labour and capital inputs are transformed into product or service outputs which is called ‘multifactor productivity’ (productivity).  Productivity as a concept has evolved from the simplistic GDP / total hours of work as non human inputs are also used to produce and provide output.

I really like to think of productivity as doing more with the same or the same with less. It is one of the most important indicators because from a society point of view productivity gains are the main source of real economic advancement and higher living standards.  Furthermore:

  • From a business point of view with rising input costs such as electricity productivity gains enable business to stay afloat and earn profits.
  • From an employee point of view productivity gains lead to greater likelihood of increased wages.
  • From an environmental point of view with a scarcity of resources productivity gains mean we are drawing less from the planet.

In dealing with the national data first, multifactor productivity grew 0.6% in 2016–17, marking six years of growth since 2011-12. This follows a period of productivity going backwards between 2004-05 to 2010-11.  Productivity growth in 2016-17 was a result of a 1.9% increase in output against a 1.3% increase in combined inputs. The input growth represents capital services growth of 1.9% and hours worked growth of 0.8%.

The 2016-17 result was however below the long term annual average of 0.9 per cent and included "significant variations across industry groups”. The largest productivity gains were experienced by Agriculture, forestry and fishing (+18.3%); Art and recreation services (+6.2%); and Wholesale trade (+4.0%). Tempering these gains were significant productivity declines in Construction (-7.3%); Manufacturing (-4.7%); and Other Services (-4.6%),.

An exceptionally good season for agricultural products in 2016-17 saw agriculture productivity rise 18.3 per cent, the fastest rate of growth since 2003-04. Growth in construction was weighed down by a contraction of heavy and civil engineering  due to reductions in new mining and heavy industrial projects. This is the fourth consecutive year that Construction saw a fall in MFP.

For the first time the ABS released experimental estimates of state and territory productivity, providing an indication over two decades of relative state productivity growth rates. Queensland productivity following the GFC had been in decline but very pleasingly in the past two years it has bounced back. Queensland productivity grew by 1.7% the second highest of all States and compares to the long term State average growth rate of 0.7%

This is fantastic news as it means our economy is transforming inputs into outputs more efficiently and is producing more goods and services from the same quantity of labour, capital, land, energy and other resources.  This improved production efficiency will inevitably generate higher real incomes and lead to long-term improvements in our economy’s living standards for all Queenslanders to hopefully benefit from. Finally it is almost guaranteed and perhaps understandable that we will see Unions use this data to push for higher wages in the months ahead.


Has Queensland dropped the ball on the Review of GST Distribution?

Many readers will no doubt be aware that the Productivity Commission is currently undertaking an inquiry into Australia's system of horizontal fiscal equalisation (HFE), which underpins the distribution of GST revenue, and an issue of hot contention among State and Territories for almost two decades.  The Inquiry is considering the influence the current system of HFE has on productivity, efficiency and economic growth and whether there may be preferable alternatives.

I have previously asked whether this Inquiry is a threat or an opportunity for Queensland given that in 2017-18 as a State we will receive close to $15 billion in GST or 24 per cent of all money available despite having only 20 per cent of Australia's population.  My view it is undoubtedly a threat. The proposal with the most profound implications for Queensland is HFE should no longer be to the highest state, but instead to the average or to the second highest State.  If actioned Queensland will continue to be a net beneficiary of GST distribution however the extent of our benefit will be reduced by $729 million each year if to the second highest state or by $1.6 billion if to the average.

My fear is that Queensland is being outgunned in the war among States in advancing their interests.  It appears we may be more reliant on political rhetoric to progress our case as opposed to the substance of good representation underpinned and advanced through evidence and statistical research. Don’t get me wrong there are some very good and well reasoned arguments advanced in the Queensland Government’s submission but I think we can do considerably better.  Our arguments are articulated in theory and words and lack research and statistics to underpin them, which is surprising given the high calibre of Queensland Treasury individuals.

Page count is crude metric by anyone’s measure, but a quick analysis of submissions to the process by each State Government reveals Queensland has the lowest page count among all the State submissions. Those States that are cross-subsidising the most (like Western Australia) spent the most amount of effort arguing for how the current system is eroding their capacity to deliver services.  Oppositely those States that receive the highest level of equalisation like Northern Territory and Tasmania also spent significant effort in putting their submissions together. 

In its follow-up 14 page submission to the inquiry Queensland has diligently highlighted the impact that changes would have on the capacity to provide services. At the same time Queensland highlighted that in its view the case for change due to erosion of national productivity and growth had not been made by the other States.  Queensland Treasury states:

“Queensland continues to remain unaware of any evidence that this is a factor for governments in the setting of expenditure and revenue policies.

Where potential HFE impacts are considered in the policy decision making process, they are at best fourth or fifth order considerations. This means that many of the incentives or disincentives that are identified in the literature, and mentioned above, exist in theory but not to any material degree in practice.

Additionally, as Queensland set out in its initial submission, the most immediate benefit brought about by the current system of HFE is arguably in the services it allows States to provide. Any change proposed to HFE on the grounds that it will reduce disincentives to pursue economic growth must be balanced against the social costs of any potential reduction in services in some parts of the country – and the important role those services play in the long-term health of the economy.”

This is unfortunately and literally the extent to which Queensland is trying to counter the call for change and it is not enough.  To be fair the post draft submission stage of the process was smack bang in the middle of our State Election with Queensland Treasury in caretaker mode. However, my point is this, if Queensland wants to maximise the likelihood that detrimental change does not occur then we need to better debunk the Commission’s proposals and highlight how they will affect our productivity and economic growth going forward.

Queensland will lose to the greater good of lifting national productivity and economic growth if we are not proactive in countering states like Western Australia when they cite they are deliberately baulking on key reforms that drive economic activity because they are penalised GST payments in doing so.  By not countering the draft proposals with evidence and by not highlighting examples on how the Inquiry’s proposals would impact on our productivity and threaten our economic growth we run the risk of losing.  Fortunately, it is not too late with a public hearing in Brisbane on the 5th of February.

The Victorian Government’s submission does an excellent job taking apart the Productivity Commission’s Report. A question they pose is should we radically change the system to benefit Western Australia, noting that if we do we're essentially forgiving them for poor budget management in the past and not saving for the future.  Queensland and Victoria could and should work together in countering the Commission’s proposals as our interests (ie lost revenue) are generally aligned.

Queensland can't rely solely on a passionate State Treasurer appearing before the media throwing barbs at a Coalition Government to advance our interests.  We need the evidence and argument to back up our opposition to change, direct to the process.  If we don’t represent our interests in this manner we really only have ourselves to blame. 


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